TAX REFORM AND ECONOMIC GROWTH IN NIGERIA

This study examined the impact of tax reform on economic growth in Nigeria between 1986-2024, with emphasis on Petroleum Profit Tax (PPT), Company Income Tax (CIT), and Customs and Excise Duties (CED). Secondary time series data were sourced from the Federal Inland Revenue Service (FIRS), National Bureau of Statistics (NBS), and World Development Indicators (WDI). The Autoregressive Distributed Lag (ARDL) model was employed after pre-estimation tests, including unit root analysis, revealed a mix of I(0) and I(1) integration orders. The empirical results showed that both PPT and CIT exert a positive and statistically significant effect on Real Gross Domestic Product (RGDP) in the long run and short run, indicating that revenues from petroleum and corporate taxation, when efficiently mobilized and managed, enhance Nigeria’s economic performance. In contrast, CED was found to have a negative effect on RGDP. While its long-run impact was marginally significant at the 10% level, the short-run estimates confirmed a strongly negative and highly significant relationship, suggesting that heavy reliance on trade-related taxes may distort production costs, discourage trade, and constrain growth. The study concludes that tax reforms, particularly those targeting petroleum and company taxation, are critical for strengthening Nigeria’s fiscal capacity and promoting long-term growth. It recommends maintaining moderate and competitive tax rates to encourage domestic and foreign investment, strengthening tax administration through capacity building and anti-corruption measures, and reviewing customs and excise duty policies to reduce their distortionary effects on trade and output.